Sterling eased against the euro and dollar onyesterday, remaining under pressure in the wake of Bank of England Governor Mervyn King’s dovish comments the previous day. Rates this morning @ 08;30am 17/09/09 are as follows:
- GBP/EUR 1.1210
- GBP/USD 1.6530
- GBP/AUD 1.8897
- GBP/NZD 2.3150
- GBP/CAD 1.7560
- GBP/CHF 1.7031
- GBP/ZAR 12.081
- GBP/JPY 149.70
Data yesterday on the UK labour market was broadly in line with expectations, but did provide some respite for Sterling as the figures were not as bad as some had feared. Unemployment rose by 210,000 in the three months to July, taking the jobless rate up to 7.9 percent, its highest in nearly 13 years. This was expected however, and so didn’t cause a further drop for the pound.
“The pace of unemployment increases has slowed sharply and the recent trend has been consistent with an economy that is growing again, albeit moderately,” said Nick Kounis, chief European economist at Fortis Bank.
However, pound is seen underperforming other major currencies as UK government bonds yields fell on lingering speculation of monetary easing. BoE policymaker Andrew Sentance was quoted as saying in a regional UK newspaper yesterday that Britain’s economy probably returned to growth in the third quarter of this year, but doubts remain about the strength of any recovery. This goes back to what I mentioned recently, that the fear is the UK may be in a W shaped recession.
A Reuters poll on Wednesday showed economists polled raised their growth forecast for the UK economy to 0.3 percent this quarter compared with 0.1 percent in an August poll.
Shares worldwide have risen strongly after the latest signs of an economic recovery in the US.
Shares on Wall Street continued upwards thanks to better-than-expected industrial production data. But there have been warnings that investors should not get too carried away while money is still being pumped into stimulus packages, which flatter the economy.
So, the story hasn’t really changed. The UK seems to be recovering, but while the BoE pump money into the economy, and the government continue try and spend their way out of the problem, Sterling will remain on the back foot.
All the while, the US economy is in recovery, and this then spurs investment into other currencies such as EUR, AUD and NZD that give a better return. This will keep exchange rates low until the BoE & government decide that they will change their policy.
In volatile times such as this, clients obviously want to achieve the best rate. Simply hoping for a better rate has left many dissapointed this week as rates have fallen. Stop Loss and Limit orders are tools that let you aim for a higher rate, while protecting you in case things move the wrong way.
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The main UK data today is Retail Sales. This measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Other data is listed below.
Jap – Interest Rate Decision
UK – Retail Sales
EU – Construction Output
EU – Trade Balance
Can – Consumer Price Index
Swi – Interest Rate Decision
US – Jobless Claims
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